Jodie Hampshire from Russell Investments

A new report released by Russell Investments estimates the “full value equation” of a financial adviser’s services – beyond investment-only advice – at a minimum of 4.4 per cent of investible funds, with the avoidance of behavioural mistakes providing the lion’s share of value

According to the report, presented at a media event in Sydney, an adviser’s professional worth is broken down into five areas, with each being attributed a nominal value. Helping clients avoid behavioural mistakes brings 1.9 per cent, getting the investment strategy and risk profile right adds 1.6 per cent and “tax-smart” investing contributes 0.9 to 1.2 per cent of value to the client’s investible funds.

Jodie Hampshire, Russell Investments’ Managing Director, said behavioural coaching is the most impactful element of the service.

“There are over 200 different behavioural issues that can affect investing including loss aversion, overconfidence, herding and familiarity,” Hampshire stated. “Advisers can’t control the markets but what they can do is use behavioural economics to have better client conversations and help clients understand their own behavioural biases to make better decisions.

Two other categories – rebalancing of portfolios plus “planning and additional wealth management services” – have variable influences which aren’t included in the 4.4 per cent total.

The report ventures that demonstrating the value of advice can improve client satisfaction “in a time of continued focus on advisory fees and natural customer scepticism about delivered value.”

Hampshire believes there is a glaring disparity between what advisers are charging and what they’re worth. “We think the value financial advisers give exceeds what they are charging their clients.

Rather than this meaning adviser should charge more for their services, Hampshire said the assertion – together with minimum 4.4 per cent adviser value estimation – should be used as a conversation point to help advisers explain their advice proposition.

“Many advisers are making a transition from a product-based revenue to more fee-based revenues, so they’re perhaps not as used to having a conversation about fees as other organisations might be,” Hampshire explained. “It’s around equipping them so that they understand their value.”

“One of the things we would observe is the holistic planning, total wealth management side of things, that’s something that advisers will often underestimate,” she added.

The report’s US and Canadian iterations have been running for 6 years; this is the second year it has been produced for Australian advisers.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at
One comment on “Financial advice valued at 4.4% of investments”
  1. Avatar George Manka

    I think moving to a more fee-based service delivery will mean advisers will get more revenue. If my average client has $500,000 FUM, then 0.9% fees per annum will be $4,500. However, a successful adviser could charge more than that in providing ongoing advice. Perhaps up to $8,000 pa ($2,000 per qtr). It does require that the financial adviser be proactive, of course. The upside is that the adviser would not be penalised if the FUM decreases.

Leave a comment